How Many $35 Billion Teslas Can We Create?

NEW YORK (TheStreet) -- I'd love to be a fly on the wall in the boardrooms of the major automakers these days.

With Tesla's (TSLA) market cap soaring north of $30 billion (fully diluted close to $35 billion), Tesla could soon acquire General Motors (GM), Ford (F) or some other company and do to Time Warner (TWX) what AOL (AOL) did in 2000.

In other words, it's panic time in Detroit, Germany, Japan and Korea! With that in mind, let's play "Shareholder Creation Wednesday" for the established automakers!

Tesla sold 23,000 cars in 2013 and has guided to 35,000 cars in 2014. That's globally. (These and the numbers below are rounded to the nearest 1,000.)

On the recent earnings call, Tesla said that sales are going to be approximately two-thirds international going forward, so that implies 12,000 cars in the U.S. in 2014. How does that compare to plug-in car sales by the other automakers?

GM: In the U.S. alone, GM sold 23,000 plug-in cars in each of 2012 and 2013. Most of these were Chevrolet Volt. Most recently, the Chevrolet Spark and Cadillac ELR have been added, but sales of those are not yet material.

Ford: In the U.S. alone, Ford sold 15,000 plug-in cars in 2013, up from 3,000 in 2012. These are the Fusion, C-Max and Focus models.

Nissan: In the U.S. alone, Nissan sold 23,000 plug-in cars in 2013, up from 10,000 in 2012. This is the Leaf.

Toyota (TM): In the U.S. alone, Toyota sold 13,000 plug-in cars in each of 2012 and 2013. These are the Prius Plug-In and the RAV4 EV.

In contrast, Tesla sold an estimated 18,000 cars in the U.S. in 2013, up from 3,000 in 2012.

Using the metrics above, very broadly speaking Tesla is selling about as many cars in the U.S. as each of GM, Ford, Nissan and Toyota. The growth rate in 2013 was much ahead of GM and Toyota, somewhat higher than Nissan and barely ahead of Ford.

If we take Tesla at face value, in that two-thirds of sales going forward is going to be international, U.S. unit growth in 2014 would be a negative 33%: 2013 sales was 18,000 cars and 2014 would be one-third of 35,000.

What about the new entrants in the plug-in car market? BMW started deliveries of its i3 models in Europe last November, and U.S. deliveries begin in the second quarter of 2014. It's fair to say that those sales volumes are hard to predict. It could be as few as 3,000 cars in the U.S. in 2014, although many more (over 10,000) internationally in 2014. BMW has talked about a 30,000 capacity for the factory, and just like Tesla, BMW is "capacity-constrained" in terms of ramping up the production volumes.

I guess this sounds like BMW will be at 30,000 cars per year sold in 2015, with 2014 coming in at approximately half. Those are the global numbers.

Recently, VW started selling the plug-in Golf in Norway. According to the local Norwegian newspaper, VW got 1,200 reservations or orders in only 3.5 hours. That's more than 10 times the 132 cars Tesla sold in Norway in January. Norway is Tesla's largest country in terms of sales, outside the U.S..

Should VW's market cap for a hypothetical plug-in car spin-out IPO therefore be 10 times Tesla's $35 billion fully diluted market cap? That would be $350 billion, or twice as large as all of Toyota. Why not?

VW-Audi group CEO Martin Winterkorn has been very vocal in saying that it will be the leader in plug-in car sales by 2018, when almost every model in the portfolio will be offered with a plug-in variant. Volkswagen has multiple models on sale in Europe, although the only model in its stable currently available in the U.S. is the Porsche Panamera, which starts at $99,000.

By early 2015, both Volkswagen and Audi will have models in U.S. showrooms. It is way too early to predict Volkswagen-Audi 2015 sales yet, but you can imagine that sales could be market-leading when the plug-in versions of the Golf, Jetta, Passat, A3, A4, A6, A7, A8, Q7, Cayenne and others become available later in 2015 and into 2016.

I am not going to take the space here to discuss the EV sales numbers -- current and future -- of other meaningful automakers such as Mitsubishi, Volvo, Fiat-Chrysler and Honda (HMC). All of them have models in the market today that are selling well in at least one geography each. All of them will launch additional models in 2015 with grander ambitions -- not just geographically.

We see at least three kinds of buckets of automakers in terms of their plug-in car sales:

1. The global volume leaders to date. Nissan has sold over 100,000 cars globally since 2010, and GM has sold over 60,000.

2. The mid-tier sales leaders in the U.S. These auto makers include Ford, Toyota and Tesla. They might be selling between 12,000 and 15,000 cars per year in the U.S., and additional quantities internationally.

3. The 2014 and 2015 growth stories. These include BMW, Volkswagen-Audi, Volvo and Mitsubishi, among others. They have low volumes today, under 10,000 annual sales rate, but are almost certainly going to be growing sales of their plug-in cars well over 100% annually in the next year and beyond -- in many cases out-growing Tesla in 2014 and 2015.

This brings us to the critical question for the boards of directors of all of these companies: With Tesla's fully diluted market cap approaching $35 billion, why can't we spin out our plug-in car business and get at least half of that valuation? Or some higher number?

After all, as it stands, some of these car companies are already selling approximately as many plug-in cars as Tesla does, and their growth rates, too, look to be similar for their EV models for the next couple of years. So why shouldn't they get a $35 billion valuation for that?

What if companies such as Nissan, GM and BMW manage to out-sell Tesla consistently in 2015 and 2016 in terms of plug-in cars? Shouldn't those plug-in car divisions each be worth a lot more than $35 billion each?

Obviously these comparisons are not perfect, for a long list of reasons. I can hear the objections already:

1. Tesla is a $70,000-$130,000 car. The others are mostly a lot less. Duh!

2. Tesla is a pure electric. Many (but far from all) of the others you cite, are also plug-in hybrids. True, but who cares? Ford says its plug-in electric customers drive over 50% on electric; GM quotes 63% and above. At least this means that they should get 50% or more of Tesla's valuation on those cars, then, right?

3. Tesla is the best car! Of course it is. It would be a shame otherwise. An $100,000 average price car compared to $35,000 average price car. It would be strange otherwise!

This is an irrelevant argument.

Much of Tesla's valuation now hangs on its Gen 3 car, the so-called Model E, which has been promised for 2017 at a starting price between $30,000 and $40,000 and 15% margin at that price. Clearly the Tesla Model E will likely be an outstanding car and sell in volumes far exceeding today's Model S, which starts at twice the price.

However, 2017 is a long way out. Having warned the competition more than half a decade in advance back in 2010, Tesla is likely going to face significant competition by 2017. I don't see how it is reasonable to assume otherwise. There is too much detail on this subject to get into in this article, but of course the competition will also have attractive plug-in cars priced between $30,000 and $40,000 no later than 2017.

There is no doubt that Tesla is making the most attractive car in the market today. I have written about that in numerous articles going back to the middle of 2012, when I first drove it. But Tesla isn't the only game in town in terms of plug-in cars overall.

If I were the other auto industry shareholders, board members and CEOs, I would be calling for some form of spinoff to capture the same kind of $35 billion fully diluted valuation Tesla is currently obtaining in the market.

At least a couple of car companies have sold more plug-in cars to date than Tesla has. Go to the IPO market with that sales pitch! Collect your fair share! "We sell more plug-in cars! We want $35 billion -- or more -- too!"

I'm looking forward to taking delivery of my future Tesla Model X or Model E, but this valuation scares me.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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